Time bomb to market meltdown ticks louder

Commentary: Prepare for zero growth, no recovery, resource wars

SAN LUIS OBISPO, Calif. (MarketWatch) – Mr. Buffett, “do you think there will be another bubble leading to a huge recession?” asked the interviewer. Oh yes, in fact, “I can guarantee it.” Guarantee it.

The interviewer shook his head: “Why can’t we learn the lessons of the last recession? Look where greed has gotten us.” Then with one of his familiar impish grins, the great master replied, “Greed is fun for a while. People can’t resist it.” But “however far human beings have come, we haven’t grown up emotionally at all. We remain the same.”

Warren Buffett made that prediction shortly after the 2008 Wall Street banking meltdown. The world’s third-richest billionaire personally guaranteeing another bubble ... guaranteeing America another market meltdown ... guaranteeing the world another “huge recession.” Now here we are four years later, and the ticking time bomb gets louder as we keep watching an avalanche of predictions echoing Buffett’s warnings.

Deepak Chopra mentions Buffett’s on-air prediction in the “Shadow Effect,” a brilliant bit of psychology that helps explain why the investor’s brain is trapped in denial, incapable of hearing a warning of a market and economic collapse.

Uncle Warren must be chomping at the bit, sitting on a cash hoard, more than $20 billion, waiting to rush in, buy when the bottom drops, exposing millions of investors lulled back by those pre-2008 delusions about a new long-term bull market.

In another era, Buffett would rival Freud and Jung in diagnosing human behavior accurately. But today, he’s using his psychological genius to outwit Wall Street’s perennial bulls and America’s 95 million gullible Main Street investors.

Buffett’s prediction “guaranteeing another huge recession” was actually a no-brainer. Read William J. O’Neil’s bestseller “How to Make Money in Stocks.” The publisher of the Investors Business Daily is one of the best numbers guys in the world. In his first edition he says: “During the last 50 years, we have had 12 bull markets and 11 bear markets … The bull markets averaged going up about 100% and the bear markets, on the average, declined 25% to 30%.” And “the typical bull market lasted 3.75 years and the classic bear market lingered only nine months.”

Warning, while Wall Street assumes these bull/bear cycles will continue ad infinitum, they may be coming to a slow, painful end by 2050.

Stock market’s long bull-bear—cycle ending, long painful bear ahead

Plan for no growth or zero growth. Or worse, wake up, see why Wall Street, America and the world economy are in the early stages of a long era of “de-growth,” a reversal of economic growth and reduction in market growth as population growth puts increasing new stresses on natural resources, commodity inflation, unemployment, social unrest, disasters, wars.

And it’ll get worse. Fast. More and more savvy guys like Buffett agree.

1. Post-industrial revolution — economic growth on long-term decline

The latest issue of Bloomberg Markets has yet another warning of declining growth from economist Richard Gordon’s disturbing research study: “Is U.S. Economic Growth Over?” The IMF warns that global growth “will slip below 2% in 2013.” History tells us that for five centuries before the 18th century, per capita growth rate was only 0.2% annually. Then during the Industrial Revolution, U.S. growth rate “shot up” to 2.5% till 1930. Endless innovations: Steam engine. Railroads. Electricity. More. But “it’s been downhill since 1950,” with growth averaging 2.1% Gordon warns: On this trajectory, the American economy will be back where it started by 2100, at annual growth of just 0.2%.

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